We have detailed information on Dividend – Meaning and its types.
Dividend – Meaning and its types.
Following is the information.
Meaning
The dividend is a portion of a profit that is distributed to its shareholders in the form of cash and bonus shares or both as a reward for investing. Boards of Directors propose the dividend of the company and it is approved by all the shareholders in AGM. Similarly, the dividend is distributed annually. A common shareholder who holds the stock till the book’s closer date gets the dividend.
Moreover, the dividend also needs to be approved by the association of the category as well. For Dividend of Commercial banks is approved by Nepal Rastra Bank.
Types of Dividend
Following are the types of dividends.
- Bonus Share.
- Cash Dividend.
Normally, Bonus Shares and cash dividends are forms of dividends in Nepal.
Read More: Dividend Tax Rate in Nepal.
Brief Information on Cash Dividend and Bonus Share.
Following are the brief definitions of the terms.
Cash Dividend
This is the most common type of dividend. The company pays cash dividends directly to its shareholder account.
Bonus Share
A bonus Share is an additional share given to its shareholder for free. Technical not free, the company pays the price for it. Hence, Bonus Share increases outstanding shares which in return increases the capital of the company but not the market capitalization.
Hence, these are the information of Dividend.
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Frequently Asked Questions
a. What is the meaning of dividend and its types?
= A dividend is the distribution of a portion of the profit to its shareholders annually. Its types are Cash dividends and Bonus shares.
b. Example of Dividend?
= For example, in FY 2078/79, a dividend of Nabil Bank Ltd (NABIL) was 30% of which 18.5% was bonus share and 11.5% cash dividend.
c. What is cash Dividend?
= Giving Dividends to its shareholders in the form of cash from the profit of the company.
d. What is bonus share?
= Bonus share is a type of dividend in which a company gives existing shareholders additional shares for free.
e. What is dividend tax in Nepal?
= 5% is the dividend tax in Nepal for both cash dividends and bonus shares. Normally, the company deducts it from the dividend and distributes it to its shareholders.
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